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Economics 4.1.1

Economics- Edexcel 4.1.1

TermDefinition
globalisation process by which economies and cultures have been drawn deeper together and have become inter-connected through deep global networks of trade, capital flows, and the spread of technology and global media
how has globalisation developed? deep global networks of trade, capital flows, and the spread of technology and global media
key benefit of globalisation allows businesses and countries to specialise in producing products where they have a comparative advantage, enabling a gain in economic welfare
characteristics of globalisation increasing trade to GDP ratios/expansion of financial capital flows across international borders/increase FDI/more global brands/deeper specialisation of labour/global supply chains/high labour migration/increasing connectivity of people
key factors contributing to globalisation containerisation/technological advances/differences in tax systems/less protectionism
containerisation dropping real prices of ocean and air shipping due to standardised containers creates economies of scale in freight industries, reducing unit cost of transporting products
technological advances cuts cost of transmitting and communicating information
differences in tax systems low corporate profit taxes help attract inflows of FDI
less protectionism average import tariffs have fallen BUT recent rise in non-tariff barriers
non-tariff barriers import quotas, domestic subsidies & tougher laws & regulations
TNCs transnational corporations
transnational corporations base their manufacturing, assembly, research and retail operations in several countries
why do TNCs relocate? relocate to countries that usually have relatively low unit labour costs to increase profits and dividends for shareholders
comparative advantage an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners
examples of TNNCs China Mobile/Alibaba/Tata Group/Infosys/Geely Auto/Huawei
impact of globalisation on different countries depends on how well integrated they are in the world economy and whether they have the factor resources that allow them to gain from globalisation
domestic savings gap a situation where the existing level of savings is insufficient to achieve an economic objective
advantages from globalisation economies of scale create gains in economic welfare/less monopolies & higher innovation/faster economic growth reducing extreme poverty/free movement of labour/open capital markets/increase awareness/improved standards of government
extreme poverty other name absolute poverty
relative poverty when households receive 50% less than average household incomes
absolute poverty living below subsistence (the person is unable to meet their basic needs of food, clean water, sanitation, health, shelter and education)
systemic risk the potential for a failure or crisis in one or more parts of the financial system to spread and cause widespread disruption to the entire system
disadvantages from globalisation rising relative poverty/threats to global commons/greater exploitation of environment/macroeconomic fragility/trade imbalances/structural unemployment/dominant global brands
impact of globalisation on UK economy expanded choice & consumer surplus/changing retail prices & rate of inflation/UK firm relocate production to lower-wage economy/net inward migration change real wages & UK gov spending/inward investment/changing share prices and profits of UK companies
external shocks events that come from outside a domestic economic system
negative economic shocks create much instability and can lead to persistent periods of weaker economic growth, higher unemployment, falling real incomes and rising poverty
positive external shocks external events that benefit the economy
examples of external shocks in a globalised world Global Financial Crisis/2020 Pandemic/volatile world commodity prices/growth slowdowns in emerging nations/international & regional trade & investment deals/currency volatility & policy changes/extreme weather /geopolitical uncertainty & terrorism risks
Created by: jessharris
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